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The benefits of public and private cooperation in financing stadium projects

Modern stadium projects typically involve a collaborative partnership between public and private interests. This has not always been the case. Throughout the nineteenth century and into the early twentieth century, team ownership almost exclusively financed professional sports stadiums. The era of public stadium finance began with the opening of the Los Angeles Coliseum in 1923. Erected in a bid for the Olympic Games, the Coliseum was the first wholly publicly funded professional stadium in the United States and initiated a shift toward public participation in stadium construction and development.

Most public stadium finance takes the form of municipal bond issues, with proceeds used to finance stadium construction and maintenance costs. In a bond issue, the local government issuing the bond directly subsidizes stadium construction, and the federal government—through uncollected tax revenue—indirectly subsidizes it. The public may also elect to subsidize a stadium through infrastructure development projects and/or property tax exemptions.

Private contributions to stadium development may include proceeds from stadium naming rights, income from personal seat licenses, pouring rights, concessionaire arrangements and/or loans or donations from the owner or team. If the stadium is on land exempt from local property taxes, and if municipal bonds were used in support of stadium development, private interests may elect to make payments in lieu of property taxes to help finance debt service on those bonds.

While public money has become an important part of stadium finance, it has its critics. Opponents claim that sports stadiums used and operated by private interests fall foul of the "public purpose doctrine" enshrined in many state constitutions, and do not serve a public good. State courts throughout the U.S., however, have consistently held that sports stadiums fulfill a public purpose (with public benefits including national media exposure and civic pride and camaraderie) and that public funding of stadiums is constitutional. Critics also argue that new stadiums do not provide sufficient economic benefits for the communities in which they are built, and that most financial gains from a new stadium flow to team ownership. Though teams do benefit from stadium projects, communities also stand to gain. Economists have established that total economic activity in a community generally rises by a multiple of any increase in public spending in that community. Stadium projects also create community economic growth and new jobs and engender civic pride.

Professional franchises seeking to update existing facilities or construct new venues should be aware of the means available to finance stadium construction and the issues involved.

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